Transcript PowerPoint-presentasjon

Norwegian Ministry
of Finance
The Norwegian Government Pension Fund Global
Paal Bjørnestad, State Secretary
NHH, Bergen 21 June 2016
Norwegian Ministry of Finance
Discovery of oil in 1969 – the Ekofisk oil field
 High government take
 Petroleum important for the
economy
Photo: Kjetil Alsvik/Conoco Phillips
Norwegian Ministry of Finance
Petroleum revenues and fund mechanism
2
Petroleum sector accounts for a substantial part of the Norwegian
economy
Share of GDP
15 %
Share of total investment
26%
Norwegian Ministry of Finance
3
Share of state revenues
20 %
Share of total exports
40 %
Petroleum revenues and fund mechanism
Source: Ministry of Petroleum and Energy (Figures as of yearend 2015)
3
Petroleum revenues are temporary and volatile
Petroleum revenues not income in
traditional sense
 Income stemming from depletion of nonrenewable natural resources
Extraction Path
 Transform windfall gain to permanent increase
in consumption
 Need for separating current accrual from
spending
Consumption path after
discovery
Necessitates saving a
large part of petroleum revenues
Consumption path before
petroleum discovery
t0
Norwegian Ministry of Finance
Time
Petroleum revenues and fund mechanism
4
GPFG is among the largest funds in the world
Market value development 1996 – 1Q 2016.
NOK billion (lha) and per cent of GDP (excl. oil) (rha)
8,000
350%
7,079
7,000
300%
6,000
250%
5,000
200%
Fund size as share of GDP for Mainland
Norway (rha)
4,000
150%
3,000
100%
2,000
50%
1,000
-
0%
1996
1997
1998
1999
2000
Sources: Norges Bank and Ministry of Finance
Norwegian Ministry of Finance
5
Fund performance
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1Q
2016
The investment strategy
GPFG
Strategic Benchmark Index
Global Equities
(excl. Norway)
«Market weights»
60 %
Global Fixed Income
(excl. Norway)
70 % Gov. (GDP weights)
30 % Corporates (Market weights)
Global Real Estate
(excl. Norway)
0-5 %
35-40 %
FTSE Group
Barclays
IPD
Index vendor
Index vendor
Return target
Global All-Cap
Global Treasury GDP weighted
by country
Global Property Benchmark
Global Inflation-Linked
Global Aggregate
Norwegian Ministry of Finance
Investment strategy
Investments
6
Investment strategy premised on Fund objective, investment beliefs and
Fund characteristics
Highest possible long-term financial return within a moderate level of risk
The investment strategy is in particular characterized by:

Broad diversification

Harvesting of risk premia

A moderate degree of active management

Responsible management

Cost efficiency

A clear governance structure
Norwegian Ministry of Finance
Investment strategy
Investments
7
The investment strategy of the Fund has evolved over time. Important
decisions are anchored in Parliament
40 % equities
Non- government
bonds
1998 2000
Some emerging
equity markets
Norwegian Ministry of Finance
2002
60 % equities
Small-cap
Inflation-linked
government bonds
2004
Ethical guidelines
2005
2006
2007
High-yield bonds
Commodity derivaties
New risk management
requirements
First investment in
unlisted real estate
2008
2011
Unlisted real estate,
All emerging equity
markets
Adjusted framework for
responsible management
2012
2014
New benchmark index for
equity and fixed income
investments
Investments
2016
New regulation on
investments in unlisted
real estate
8
Number of factors speak against permitting investments in unlisted
infrastructure

Difficult to assess impact on risk/return due to lack of data

Advantages compared to other investors?

Unlisted infrastructure market is small

High regulatory and political risk

The fund will become more visible and more easily subject to criticism

The investments are complex, resource intensive and difficult to evaluate
Norwegian Ministry of Finance
Investment strategy
Investments
9
What about investing in developing countries and renewable energy?

Both the experts and Norges Bank recommended such investments

Have to meet the same requirements as the other investments for the Fund

There already exist a lot of public instruments to promote such investments

No financial rationale for permitting infrastructure investments only in submarkets.

Environmental-related investments has doubled during last couple of years

Establishment of Fornybar AS
Norwegian Ministry of Finance
Investment strategy
Investments
10
Summary
• Not prepared to permit the Fund to invest in unlisted infrastructure at this stage
• … but we will continue the work
Norwegian Ministry of Finance
11
Norwegian Ministry
of Finance
P.O.Box 8008 Dep
NO-0030 Oslo, Norway
Telephone: +47 22 24 41 63
E-mail: [email protected]
www.regjeringen.no/en/dep/fin
www.government.no/gpf
www.nbim.no/en
www.etikkradet.no/en
Norwegian Ministry of Finance